Higgins looked on course to progress when he led 3-1, but Ebdon battled back gamely to sneak through in a closely-fought final frame.
A break of 58 opened up a 63-34 lead for Ebdon, who was in control with Higgins needing a snooker heading into the colours.
The Scot managed that on the brown, but Ebdon was not to be denied to claim the frame 72-43 and progress 5-4.
Ebdon will meet Neil Robertson in the last eight after the Australian brushed aside Stephen Hendry 5-3.
The duo could not be parted after six frames, but from there Robertson turned on the style in a slick diplay to cut Hendry's tournament short.
The 30-year-old sealed the win with a break of 86 and to set up a meeting with his fellow former world champion.
Earlier on Thursday world number one Mark Selby withdrew from the tournament with a neck injury.
"I'm absolutely gutted to have to pull out and to let down the Chinese fans as I was really looking forward to playing Ding (Junhui) tonight," Selby said.
Despite defeating Chinese player Li Hang 5-0 in the first round, Selby has had to concede his second-round match with Ding because of the injury.
"I have been suffering with neck pain and I struggled through my first-round match," he told www.worldsnooker.com.
"I don't want to do any more damage, especially with the world championship coming up, so I'm going back to the UK to get some treatment. I look forward to coming back to China as I love playing here."
Ding will next meet Ali Carter after he won the third of the evening matches 5-1 against Lu Ning.
Ronnie O'Sullivan secured a comfortable passage as he defeated Mark Williams 5-1.
It was nowhere near as easy for Stephen Maguire, but he edged out Ricky Walden 5-4.
There were also wins for Judd Trump, who beat Stuart Bingham 5-3, and Stephen Lee who won by the same score against Graeme Dott.